Modelling the distribution of mortgage debt (Bogeumjari loan) using inflow and outflow data*

This study analyzed the dynamic characteristics of household debt through an analysis of cash flow data for Bogeumjari loans. The overall loan balance was found to be largely influenced by mortgage inflows, whereas mortgage outflows remained relatively stable. Mortgage inflows, in particular, were strongly correlated with regional housing price fluctuations, with regions exhibiting more significant price fluctuations where inflow volatility was higher. A vintage analysis revealed that Bogeumjari loan borrowers maintained an average monthly repayment of around KRW 700,000 over an extended period. However, the repayment burden has risen rapidly following the rise in housing prices in 2022. A noticeable trend was observed in the increasing proportion of interest payments relative to principal payments, with interest repayments exceeding principal repayments from 2021 onward. Next, using a mortgage inflow and outflow projection model, this study predicted shifts in the distribution of the Bogeumjari mortgage pool. At the time of loan origination, loan-to-value (LTV) ratios were concentrated around regulatory thresholds (e.g., 60% and 70%), underscoring the role of LTV regulation in determining loan size. By contrast, the projected current loan-to-value (CLTV) distribution based on simulations showed a leftward shift in the central distribution, with a wider spread than the original distribution. This implies that changes in collateral housing prices have a greater impact than borrowers’ repayment behaviors. Lastly, an analysis of the distribution characteristics by CLTV levels revealed that high-CLTV borrowers held significantly larger loan amounts and exhibited slower debt repayment rates. This indicates that for effective household debt management and deleveraging, focusing on gradual principal repayment by high-CLTV borrowers is necessary. Moreover, incentivizing early repayment through fee waivers and fostering mortgage refinancing in low-interest-rate environments is crucial for stable management of household debt.